Pay Attention if you are in the Real Estate market
I had a lengthy conversation with @Phillip Dwyer today and Catherine Austin Fitts,http://solari.com/blog, former assistant Secretary of HUD under Bush 1, we decided I should open a discussion with BP for input. I am going to make a long discussion short, I promise, cause we talked forever.
Back Ground
Venture Capital(VC) funds(think Blackstone Group, $200B managed types) are moving into SFH rentalhttp://tradewindvegas.wordpress.com/2012/11/22/blackstone-group-lp-eyes-sf-rentals-in-vegas/, we all know this by now and I think there are dots to connect. They just bought 10,000 homes for $1.5B from Fannie Mae.
Now Congress is planning a gutting of the mortgage interest deduction, increased capital gains rates and ordinary tax rates, among other changes. This becomes a disincentive to SFR investors. Multiple property loans are becoming harder to get every day with tougher underwriting guidelines, even for wealthy buyers. There is also discussion of privatizing Soc. Sec.
The Concern
If we use Vegas as an example, there are 50-60,000 properties(The Shadow Inventory) that have NOD's filed and not moved forward to Trustee Sale. Call this wholesale stockpiling. Sometime in the near future, banks move to trustee sale taking the homes back and then dispose of the homes to Fannie and Freddie after collecting MTG insurance. Fannie/Freddie bulk sale out to VC. Avoiding main street investors like us. Following me? VC rents the homes, increase value and sell off retail to REIT's and Pension Plans(maybe even Soc. Sec.) as an exit. Blackstone was in Vegas last week and asked a small builder to construct 200 SF homes, they will finance to construction and provide the take out sale. They will then rent the homes for a couple years.
VC takes control of the single family rental market, flips out for huge profits and retirement funds become SFR investments.
The Question
I know this sounds like some cock-eyed conspiracy theory, but what is most important to us is what? Is it time to go all in, leverage buying anything we can get our hands on? Or are the rental rates going to be drivten down by the wall streeters because they can sell at lower returns and still make huge profits?
Comments (2)
That is what we wanted to see if this is being considered by other markets. I really feel like this will have a major impact on all facets of our industry. Thats why we are trying to get a discussion going so we can look at this from all points of view. At this point we are not sure. maybe it will have a small impact or other school of thought is if we should leverage to the hilt to obtain as many properties to hold as possible Vs. flip enough current inventory to reduce current debt levels.
Tiger M., about 12 years ago
This is very interesting as you are the third investor that has brought this to my attention just this week! How do you see the affecting rehabbers like myself?
Glenn Espinosa, about 12 years ago